Supply and Demand Indicator MT4
Supply and demand are two essential components in the financial markets and particularly as regards currencies. When it comes to currency markets, supply and demand factors are subject to investor’s buying and selling activity. Comprehensive knowledge of the interaction between supply and demand, therefore, will determine the trader’s take profit levels or entry levels when trading. As one trading with supply and demand, it is crucial to recognize that these levels appear to change all the time. And this is where Supply and Demand Indicator MT4 is a must to know about. Let’s see if this one makes our TOP 10 MT4 Indicators page.
Supply and Demand-based Trading
The idea of supply and demand-based trading was made by Sam Seiden. The idea became famous at a period when trading strategies were focused primarily on the use of multiple indicators.
The focus on indicator-based trading strategies got to its height when trader became disinterested in price. The overdependence on indicators also got to a point where traders became confused about what their systems were showing them.
It was in the midst of the preceding confusion that the supply and demand idea was birthed. A development which was seen as a needed tonic. This technique of analysis took the perennial trading system hinged on support and resistance and shifted it into something more purposeful to traders. Many advanced traders say that a supply and demand indicator is the best non repainting indicator for day trading.
Understanding the Chart Pattern
Sam Seiden built his trading-based analysis on supply and demand trading. The ideas in his approach were products of his wealth of experience trading on the floor at the Chicago Mercantile Exchange (CME).
To be effective in adopting supply and demand trading, traders need to have an in-depth knowledge of the market structure. It is also essential that traders understand chart patterns, recognize trends and understand happenings in the markets.
Besides, Seiden simplified his idea, which accounts for why it is very famous.
In explaining the concept, Seiden postulated that the supply and demand levels regularly see the below features:
1. Supply = Rally, base, drop
2. Demand = Drop, base, rally
This means that a demand level is developed when prices drop to a price area, consolidate and then rally, hence recognizing the price level where there is demand. This is a support area formed.
To form a supply area, prices rally, form a base, consolidate and then start to drop; this is referred to as a resistance area.
The chart below is an illustration of the supply/demand areas.
Figure 1: Supply-demand indicator
In Figure 1, is the application of supply and demand indicator mt4 on the NZDUSD chart. The maroon colored rectangle exemplifies the supply or resistance area, while the blue rectangle illustrates the supply area or the support area. BTW you can use the supply and demand indicator mt4 in combination with a premium mt4 trend indicator also for extra confirmations.
As can be seen above, the indicator plots the levels automatically. Looking at the demand area closely, you will discover that the price retests this level and before rebounding strongly. At this point, buyers overwhelm the sellers, leading to higher prices obeying the law of demand and supply.
Strength and Weakness Levels of Supply and Demand
The concept of strength and weakness in supply and demand is to enable traders to have some precision when trading with this technique.
The strongest supply or demand area is at the point when price tests the level for the first time after identifying the level. As illustrated in Figure 1, the blue supply area is shown being tested by price for the first time. If you study this carefully, you will discover that the price touches this level before posting a rally.
This pattern is indicative of a strong level of supply and possibly demand if it occurs in the resistance area.
If price retests the supply or demand area for a second time, it is said to be a moderate level. It diminishes the strength of the supply or demand area. Therefore; traders are advised to tread carefully.
The price levels of supply and demand can differ in width depending on how these levels were formed and how price acted.
Figure 2: Supply and Demand strength
Here in figure 2, the price has rallied back to an earlier established level of supply; this would signify the first retest of this level from the time the supply area was established. It can be inferred here that price is likely to fall.
How Do You Use the Supply and Demand Indicator MT4?
The application of Supply and Demand indicator is user-friendly. After installing the indicator, all you need to do is drag/drop the indicator onto your charts.
The supply and demand indicator can chart the levels based on the time frame you are presently employing. So, when the user switches timeframe, the levels also change.
The settings for the indicator are quite easy to apply, as indicated in Figure 3, below.
Figure 3: Supply Demand Indicator MT4 Settings
How Do You Trade with the Supply and Demand Indicator MT4?
It is essential to know some of the ways the supply and demand indicator can be used to improve your trading.
Recognizing Support and Resistance Levels
It is easy to recognize support and resistance levels while using the supply and demand MT4 indicator. All you are required to do here is to drag and drop the indicator for the current time frame and implement your trading strategies.
For instance, anticipating a reversal candlestick pattern close to the supply or demand area can be a great way to predict price reversals and trade them accordingly.
Figure 4: Supply and demand indicator MT4 – Trading strategies
As can be observed in Figure 4 above, the Stochastics oscillator was adopted. It is a great idea to use the oscillator as it can tell you when the momentum is rising or falling. Looking at the area marked with the arrow, it is evident that the equivalent Stochastics oscillator moves up from the oversold levels.
When you synthesize the data from the supply and demand indicator which displays a first test of the level at the strongest and the positioning of the Stochastics oscillator, it is inferred that it will be a great idea to go long at this level. Stops can also be set at the lows immediately after the bearish candlestick pattern.
Conclusion On Supply And Demand Indicator MT4
As have been clearly illustrated in this piece, the supply and demand indicator MT4 is an automated indicator deployed on MT4; it charts areas of support and resistance levels. The information indicated enables traders at a glance to identify potential price areas where the price is probably going to reverse direction.
By adopting the supply and demand, the trader can pay more attention to price rather than the indicator. At the same time, you can try other tools and indicator through this link on this platform.
And don’t forget to leave feedback in the comment section.